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Olam International Disputes Accusations by Short-Seller

SINGAPORE — The Singapore commodities firm Olam International undertook a vigorous defense Wednesday against attacks on its accounting practices and acquisitions by the trading firm Muddy Waters, saying it was not at risk of insolvency.

Olam, which is 16 percent owned by Temasek Holdings, the Singapore state investor, said in a 45-page report that it had enough liquidity to pursue its current business and future investments.

The rebuttal focused on major issues raised by Muddy Waters in its own report, released Tuesday: Olam’s solvency, accounting-related assertions and the company’s business model, acquisitions and capital spending.

“We believe that the report’s assertions are motivated to distract and create panic amongst our continuing shareholders, bondholders and creditors,” Olam said in a statement.

Muddy Waters is a short-seller, a company that profits by betting on a decrease in another company’s share price. It rose to prominence after attacks on Chinese companies listed in North America.

The battle between the two, which Olam has taken to a Singapore court, has illuminated common accounting practices at commodities companies.

Olam said it had planned for an “appropriate” capital structure and raised the equity and debt necessary to meeting its investment plans.

“We believe that even without raising any further debt we can easily meet our debt repayment obligations and pursue our planned capex,” it said, referring to capital expenditures, “in addition to meeting the ongoing working capital needs. We also have the option of phasing out some of our fixed capital investments if the debt markets completely dry up for some reason.”

Olam said gains generated from accounting for negative good will in certain acquisitions are treated as “exceptional” and are excluded when reporting core operational profits.

The CIMB analyst Lee Wen Ching said the Muddy Waters report provided sensational headlines but little new information. “We think this report exaggerates the negatives, most of which are already known by the market, rather than bringing up new concerns,” she said.

Olam, started by the Kewalram Chanrai Group in Nigeria, began as an agricultural commodities trader and now owns plantations and processing plants.